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Commercial Mortgages: Everything you need to know


What is a commercial mortgage?


A commercial mortgage serves as a lending arrangement extended by a lender to a borrower, secured by a legal charge over commercial buildings such as an Office building, industrial warehouses, shopping centres, or apartments.

This type of financing offers a versatile solution, catering to various business needs. 


Types of commercial mortgage


Commercial mortgages offer diverse options tailored to different business needs and property usage scenarios in the real estate market.

There are three primary types:


Owner-Occupied Commercial Mortgage

  • Designed for businesses that intend to operate from and own the property they wish to borrow against.

  • Ideal for purchasing premises your business currently utilises or acquiring new property for business operations.

  • Provides flexibility in terms of property ownership and operational requirements, supporting various business expansion and growth strategies.

For more information about owner-occupied commercial mortgages, have a read of our latest free guide.

Commercial Investment Property Mortgage

  • Suited for property owners who are investors, generating rental income from third-party tenants or licensees.

  • Rental income from the property typically covers the repayment of the loan over time.

  • Offers opportunities for investors to diversify their portfolios and generate passive income.

Property Portfolio Loan

  • Catering to property professionals and investors with multiple property investments.

  • Lenders may secure the loan against some or all of the client's property portfolio, including residential, commercial, or mixed-use properties.

  • The loan is assessed based on the aggregate income from the portfolio to meet the proposed loan repayments. 

Selecting the appropriate type of commercial mortgage depends on your business circumstances, usage plans, and investment goals. Understanding the advantages and drawbacks of each option is crucial in making an informed decision.


When are commercial mortgages used?


Commercial mortgages serve as versatile financing solutions for various business needs and property transactions.

They are commonly utilised for:


Property acquisitions and refinancing

  • Used to acquire or refinance both residential and commercial properties, including trading businesses.

  • Typically, lenders secure the loan with tangible security in the form of a legal charge over the property being offered as collateral.

  • Suitable for property purchases, such as a commercial tenant buying their freehold or relocating to larger premises, as well as refinancing existing properties.

Business expansion and investments

  • Enable a business to rapidly start expanding initiatives by releasing equity in existing properties to invest in other assets or businesses.

  • Can be utilised for purchasing existing trading businesses like hotels or care homes, or investing in property development projects.

  • Commercial mortgages also facilitate property investments, allowing businesses to generate rental income from third-party tenants or lessees.

Property development and refurbishments

  • Provide structured development facilities for constructing new properties or refurbishing existing ones.

  • Ideal for financing property improvement projects or significant capital expenditures, such as extending hotels or commercial spaces.

  • You can begin renovations without needing to get approval from a landlord.

Commercial Buy-to-Let Investments

  • Offer an avenue for investing in commercial properties to generate higher yield returns compared to residential buy-to-let investments.

  • Investment in commercial properties can lead to property appreciation over time, increasing business capital and overall wealth accumulation for investors.

  • Commercial mortgage payments are often tax deductible meaning this offers additional financial incentives for investors. 

Whether you're purchasing a new property, releasing equity from existing assets, or investing in commercial ventures, a commercial mortgage offers flexibility and affordability to support your business objectives.


What do I have to do to qualify for a commercial mortgage?


Qualifying for a commercial mortgage involves meeting certain criteria set by lenders, which can vary depending on the lender's policies and your specific circumstances.

Here's an overview of key considerations:

Loan Term

  • Commercial mortgages typically start from a minimum loan amount of £10,000, with no upper limits set by most lenders.

  • Repayment terms usually range from 5 to 30 years with monthly payments, providing flexibility in loan duration.

Acceptable security

  • Lenders consider the type and condition of the property being used as collateral for the loan.

  • Various property types are generally acceptable, including hotels, retail units, offices, industrial units, and more.

Borrower eligibility

  • Applications are welcome from a range of business entities, such as limited companies, partnerships, sole traders, LLPs, and offshore companies.

  • Primary applicants typically need to be between 18 and 75 years old, though exceptions may apply.

Geographical restrictions

  • Most lenders accept applications from across the UK and Northern Ireland, with some restricting services to specific regions.

  • Rarely, certain lenders may have exclusivity agreements or preferential arrangements with businesses operating in particular areas, restricting access for others.

Credit checks

  • Lenders conduct credit history checks, but an imperfect credit score may not necessarily disqualify you.

  • Specialist lenders may cater to individuals with imperfect credit histories.

Income verification

  • Providing evidence of income, usually through two years of accounts, is often required.

  • Income verification is essential for assessing the borrower's financial stability to ensure they have the necessary cash flow to pay off the loan.

Lender meetings

  • Some lenders may require in-person meetings or interviews as part of the loan application process.

  • Your broker can help prepare you for these meetings and address any questions or concerns.

It's important to note that each lender has its criteria, and eligibility requirements may evolve over time.

Working with a specialist broker like Finance Nation can help navigate the complexities of the application process, ensuring you meet the necessary criteria and find the most suitable commercial mortgage solution for your needs.


What are the interest rates & fees involved?


Interest rates

Interest rates for commercial mortgages can vary significantly among lenders. Typically, they start around 2% with larger traditional banks but can rise to approximately 12% with niche lenders for higher-risk transactions. Lender perception of risk heavily influences pricing, with lower risk often resulting in lower interest rates.

Finance Nation's team assists in structuring applications to present them favourably to lenders, ensuring competitive terms.


Associated costs

  1. Arrangement Fees: Arrangement fees are charged by the lender for setting up the loan and usually range from 0.5% to 2.5% of the borrowed amount. Some lenders may require an upfront payment.

  2. Valuation Fees: Valuation fees cover the cost of a property valuation by the lender's valuer and typically start around £500.

  3. Legal Fees: Legal fees include expenses for legal services such as insurance, surveys, and deed preparation. Costs vary depending on the complexity of the transaction.

  4. Broker Fees: If using a specialist commercial mortgage broker, fees typically start at around 1% of the total loan value. Brokers assist in finding the best deals and presenting applications to lenders effectively.

Other potential fees:

  1. Exit Fees: Exit fees are charged upon loan repayment or termination.


  2. Commitment Fees: These fees ensure borrowers proceed with the agreed terms and conditions.

  3. Monitoring Fees: Monitoring fees cover ongoing management or oversight of the loan. Stamp duty land tax (SDLT) is payable on properties valued at £150,000 or more, calculated as a percentage of the purchase price.


Understanding these rates and fees is crucial when comparing commercial mortgage options. Consulting with a specialist broker like Finance Nation can help navigate the market, ensuring you secure the most competitive terms tailored to your specific needs.


Why should I use a commercial mortgage broker to access business mortgage or property finance?

SMEs and property professionals are often overwhelmed with managing and growing their businesses, leaving little time to navigate the complexities of securing finance.

A reputable commercial mortgage broker doesn't just arrange finance; they manage, control, and coordinate the entire process from start to finish, allowing you to focus on running your business.

Finance Nation's team of specialists utilises their knowledge, experience, and skills to present deals to lenders in the best shape possible.

This reduces a lender’s perceived risk, opens up more options, and ultimately reduces the interest you'll be charged for borrowing the money.

With an extensive network of over 150 lenders across the UK, Finance Nation navigates the complex market on your behalf.

They do all the hard work, using their vast experience and up-to-date knowledge of lenders' criteria to get your application in front of the right lenders and underwriters as quickly as possible, saving you time and effort.

Is working with a commercial mortgage broker better than going direct?

Securing a mortgage for a commercial property involves a deep understanding of financial markets, regulations, and various specifications. A reliable mortgage broker possesses the skills and knowledge necessary to navigate these intricacies, ensuring the most cost-effective and beneficial outcome for borrowers.

Working with an experienced broker provides several advantages:

  • Tailored Solutions for Specific Needs: Brokers offer tailored solutions based on individual business needs, considering factors such as financial situation, industry, growth plans, and risk tolerance.

  • Access to a Wide Network of Lenders: Brokers have access to a vast network of lenders, including traditional banks, credit unions, and alternative lenders. They understand lenders' requirements and criteria, saving valuable time and effort for borrowers.

  • Saving Time and Effort: Brokers handle research, paperwork, and negotiations, allowing business owners to focus on day-to-day operations. This eliminates mistakes and the risk of accepting unfavourable terms.

  • Expert Guidance and Advice: Brokers provide valuable advice and guidance, explaining complex financial concepts in simple terms. They analyse the long-term implications of mortgage options and empower borrowers to make confident decisions.

  • Cost-Effective Solutions: While brokers charge fees for their services, the savings they generate often outweigh the cost. They negotiate better rates and help businesses find cost-effective mortgages, resulting in significant savings over time.

Why choose Finance Nation?


Finance Nation is a successful commercial finance brokerage with access to lenders that the general public may not know about.

We have established relationships with lenders who exclusively work with intermediaries, giving our clients access to a wider range of options. This ensures you are able to make the most informed decision, ultimately leading to the best possible price and terms.

The first step to accessing our services is to arrange a conversation with one of our experienced team members. Register with Finance Nation today to get started on securing the commercial premises your business needs.

Discover the power of Asset Finance in our comprehensive guide: "Asset Finance: The Key to Unlocking Business Growth." Explore strategies for leveraging assets to drive your business forward.


  1. Geographical Restrictions on Commercial Mortgages

    Commercial mortgages can typically be used for properties outside the UK and Northern Ireland, but the availability and terms may vary depending on the lender and the specific property location.

    It's advisable to consult with a commercial mortgage broker familiar with international transactions for guidance on available options and potential challenges.

  2. Industry-specific Considerations for Commercial Mortgages

    While commercial mortgages are versatile, lenders may be more cautious about certain industry types due to perceived risks.

    Industries with volatile revenues or specialized properties may face more scrutiny. However, each lender's criteria may differ, so it's essential to discuss your specific industry and property with a broker to explore available options.


  3. Assessment of Property Value in Commercial Mortgages

    Lenders typically assess the value of the property being used as collateral through professional valuations.

    The valuation process considers various factors such as location, condition, and potential income generation. The outcome of this assessment influences loan terms, including loan-to-value ratios and interest rates. Understanding how lenders evaluate property value can help borrowers negotiate favourable terms.

  4. Considerations for Non-traditional Business Structures

    Businesses with less traditional ownership structures, such as cooperatives or social enterprises, may encounter specific criteria or considerations when applying for a commercial mortgage. Lenders may assess factors like stability, governance, and financial performance differently for these entities.

    Working with a broker experienced in financing diverse business models can help navigate any unique requirements.

  5. Direct vs. Brokered Commercial Mortgage Financing

    There are situations where borrowers may opt to seek financing directly from a lender instead of using a commercial mortgage broker. For instance, borrowers with well-established relationships with specific lenders or extensive experience in commercial lending may prefer direct negotiations. Additionally, borrowers who have the time and expertise to research and negotiate financing terms may find it more cost-effective to approach lenders directly.

    However, working with a broker can offer access to a broader network of lenders, expertise in structuring deals, and time-saving benefits, particularly for complex or specialized financing needs.